CSE list­ings as a bridge to tap in­sti­tu­tional funds

With fund­ing from banks dried up or next to im­pos­si­ble as banks in Cyprus and around the globe cut lend­ing and in­vest­ments in risky as­sets to boost cap­i­tal ra­tios, en­trepreneurs and start-ups in need of fund­ing for promis­ing ideas have to find al­ter­na­tive fund­ing so­lu­tions.

En­trepreneurs and start-ups who wish to launch promis­ing new ven­tures, whether it in­volves in­vest­ing in dis­tressed as­sets to de­vel­op­ing a new mo­bile ap­pli­ca­tion, can use a suc­cess­ful list­ing on the Cyprus Stock Ex­change as a bridge to se­cure fund­ing from in­sti­tu­tional in­vestors.

Most en­trepreneurs and start-ups start their fund rais­ing ex­er­cise by tap­ping into per­sonal sav­ings, ap­proach fam­ily and friends, but there is a limit to how much they can raise from such sources.

The best re­sults may be ob­tained by ap­proach­ing in­sti­tu­tional in­vestors – pen­sion funds, mu­tual funds, UC­ITS, Al­ter­na­tive In­vest­ment Funds (AIFs), reg­u­lated funds, in­sur­ance funds and oth­ers who have huge re­sources and the abil­ity to in­vest or al­lo­cate funds for wor­thy projects.

Since most such funds by their own char­ter are pro­hib­ited to in­vest in pri­vate com­pa­nies, the bridge to clos­ing the fund­ing gap is for en­trepreneurs and start-ups to list their fi­nan­cial in­stru­ments on the CSE’s Emerg­ing Com­pa­nies Mar­ket (ECM/CSE) un­der sim­pli­fied list­ing rules and al­low such funds to in­vest in their fi­nan­cial in­stru­ments and in turn for the money to be in­vested in the promis­ing projects.

EMERG­ING COM­PA­NIES MAR­KET

The ECM/CSE ad­van­tage is that is the MTF Mar­ket of the CSE. It’s key it al­lows start-ups with no pre-his­tory to se­cure a list­ing of their shares or bonds pro­vided they sub­mit a de­tailed busi­ness plan and 3-year fi­nan­cial fore­cast.

Sim­i­lar to any MTF op­er­at­ing in the EU28, is­suers do not need to sub­mit a prospec­tus to list on the ECM/CSE since list­ing is done via an Ad­mis­sion Doc­u­ment pre­pared by the au­tho­rised Nom­i­nated Ad­vi­sors that the is­suer needs to main­tain. There is also no re­quire­ment for the is­suer to pro­vide liq­uid­ity or meet min­i­mum mar­ket cap­i­tal­i­sa­tion rules.

Eurivex, a reg­u­lated Cyprus in­vest­ment firm, is an au­tho­rized Nom­i­nated Ad­vi­sor (No­mad) to help fa­cil­i­tate the list­ing of lo­cal and for­eign com­pa­nies on the ECM/CSE.

List­ing fees are very rea­son­able and on-go­ing re­quire­ments min­i­mal while the whole list­ing takes one month to com­plete.

THIRD MAR­KET OF THE VI­ENNA STOCK EX­CHANGE

The Third Mar­ket of the Vi­enna Stock Ex­change is the MTF Mar­ket of Aus­tria where Eurivex is very ac­tive for list­ing of cor­po­rate bonds, util­is­ing Aus­tria’s com­pet­i­tive ad­van­tage of us­ing the Ger­man Xe­tra trad­ing sys­tem. Through the Aus­trian cus­to­dian bank, the OeKB, there is a pos­si­bil­ity for di­rect set­tle­ment with Clearstream, Euro­clear and even the NSD, the Rus­sian CSD.

LACK OF LIQ­UID­ITY

One of the key short­com­ings of the MTF Mar­kets, whereby the is­suer is un­der no obli­ga­tion to pro­vide liq­uid­ity, is the lack of traded vol­umes on the fi­nan­cial in­stru­ments (shares, bonds or funds) af­ter their list­ing.

In­sti­tu­tional in­vestors are fully aware of the scarce liq­uid­ity con­di­tions pre­vail­ing on the MTF Mar­kets which is why they would not in­vest more than 10% of their as­sets in such mar­kets. But since such in­sti­tu­tional in­vestors man­age huge portfolios, even a tiny frac­tion of their in­vestable as­sets would be huge for a pri­vate ven­ture.

FLEX­I­BLE AND COST EF­FEC­TIVE

For en­trepreneurs and start-ups that can at­tract the at­ten­tion of in­sti­tu­tional funds and their man­agers, the list­ing of shares or cor­po­rate bonds of­fer­ing a high yield is prob­a­bly the fastest and cheap­est way to se­cur­ing all or a ma­jor part of the fund­ing re­quire­ment for their projects.

The fact that the list­ing process can be com­pleted in the case of a share is­sue in less than a month, while a cor­po­rate bond list­ing can be com­pleted in less than two weeks and through sim­pli­fied list­ing pro­ce­dures and on very rea­son­able costs, means the stock ex­change bridge is one of the most ef­fec­tive ways to al­ter­na­tive fund rais­ings.